Omar Aguilar, chief investment officer for equities who oversees
$120 billion in assets, told Business Insider on Thursday that
his team is tilting clients to consider growth areas in
developed markets like Japan and the Eurozone.

But to advise clients to reduce exposure even further, Aguilar
says three things have to happen.

First, Aguilar said gross domestic product would
have to continue declining. On Friday morning, we got the
advance estimate of
fourth-quarter GDP, which showed that economic growth slowed
to 0.8%.

The weakness in the fourth quarter was largely felt in the
industrial sector as business fixed-investment spending fell at a
1.8% rate. This was the first decline since 2012.

But the real risk to the economy is that consumer
spending joins capital expenditures in a slowdown. Consumer
spending for the fourth quarter was stronger than expected,
although Aguilar says it's a "big question mark" for Q1. The
economy's main growth engines are investment and consumer
spending.

Again, Friday's release
was an advance estimate that will be
revised twice over the next two months. But if the releases
show any further weakness or come in below expectations
this would be a signal to reduce exposure US stocks.

The second big signal Aguilar is looking for is
more defaults in the risky high-yield credit space.

Defaults in the energy and mining sectors in particular jumped
late last year as commodities tumbled and incomes dried up. And
as the risk on junk bonds has increased, the spreads between
their yields and comparable US treasury bonds have spiked to
levels
usually seen during recessions.

This is gloomy, but remember that the weakness has been dominated
by energy companies amid plunging oil prices. A further widening
in spreads, however, and Aguilar would know that it's time
to sell more US stocks.

The final signal to sell more stocks for Aguilar would be a
material change in the stock market's valuation.

The market correction in January that brought stocks more than
10% below recent highs has made stocks cheaper than they were in
December. (The simplest way to value stocks is their
price-to-earnings ratio, which just takes the price of stocks and
divides them by earnings, which necessarily means stocks get
"cheaper" as the numerator gets smaller — assuming, of
course, earnings remain steady.)

However, Aguilar still thinks stocks are not
crazy cheap and are at a merely average valuation relative
to history. A sharp rebound in the market could tilt
the scales even less in favor of stocks.

And so if the combination of these three factors were to
play out and thus signal to Charles Schwab that it's time to
reduce exposure even further, Aguilar expects this would
occur be in the first half of the year.

This is not, however, Aguilar's base case.

"It will take more than [what's happening right now]
for us to recommend people start going against the US," Aguilar
said, "because we're still the best house in the
neighborhood."